Section 80C of the Income Tax Act places a cap on the amount of tax benefits you can receive through investments.
Several financial instruments are available for individuals in the market for investment in order to reduce taxes. The equity-linked saving scheme (ELSS) mutual fund is one of the investments that can lower taxable incomes. Under this mutual fund programme, asset management programme, asset management companies (AMCs) invest their corpus in stocks.
What is ELSS mutual fund?
ELSS mutual funds are equity funds that place a significant percentage of their corpus in equity or products with an equity component. An individual can invest in stocks through ELSS mutual fund savings programme. These plans are offered by several fund institutions.
These programmes include DSP Tax Saver, Mirae Asset Tax Saver Fund, Canara Robeco Equity Tax Saver, and IDFC Tax Advantage.
Investment in ELSS mutual fund:
ELSS funds offer a tax exemption of up to Rs. 150,000 from your annual taxable income under Section 80C of the Income Tax Act, they are also known as tax saving plans. It can save up to Rs. 46,800 a year in taxes.
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There is no maximum tenure however, there is a lock-in period of 3 years. After three years investor cannot withdraw their funds. In order to sell the underlying mutual fund units, they will have to pass three years since the date of unit allocation.
You obtain long-term capital gains, or LTCG when you redeem the units. Up to Rs. 1 lakh in one financial year, these gains are not taxable. Any LTCG above this threshold is subject to a 10% tax on gains over Rs. 1 lakh, exempt from indexation.
The fund makes diversified stock investments across a range of market capitalizations, themes, and industries.
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Although you can invest a lump sum in an ELSS scheme, most investors prefer the SIP method since it enables them to contribute small amounts and takes advantage of tax advantages while also giving them the chance to build wealth.
The majority of ELSS programmes allow investors to start with as little as Rs. 500. This makes sure that you can start investing right away without needing to build up a sizeable investible corpus.
List of a few ELSS funds in India to invest are:
- Axis mutual fund
- Kotak mutual fund
- Nippon mutual fund
- HDFC mutual fund
- ICICI prudential mutual fund
- UTI mutual fund
- IDFC mutual fund
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 "Mutual Fund: Save up to Rs 1,50,000 using ELSS scheme, here's how")
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